THE RATE charged on Britain’s €3.8 billion loan to Ireland will be reduced, it was confirmed yesterday, but chancellor of the exchequer George Osborne will make a final decision on how much it is to be cut by once Europe decides how much the European Financial Stability Facility (EFSF) is to charge for its bailout loans.
Last night, the treasury said the final details would be settled once the EFSF rate had been struck: “Our priority, obviously, is the cost to the British government. We have to make sure that the British taxpayer doesn’t lose out,” an official told The Irish Times.
Mr Osborne offered the loan, along with a further €4.5 billion contribution channelled through the International Monetary Fund, last December, declaring that it was in the UK’s own interests to “help a friend in need”.
Welcoming the Brussels decision to cut the costs of the EU’s loan to Ireland, Mr Osborne said: “I’ve been arguing for some time that the interest rates charged for euro zone loans were too high. I’m pleased therefore they have now reduced those rates.”
“That enables Britain to cut its rate on its loan to Ireland, while ensuring all of the benefit goes to Ireland and not to higher interest rates paid to euro area governments. We stayed out of the Greek bailout as promised. But, for Britain, Ireland is a special case. Our loan will help them and is in our national interest,” he said.
The first of eight tranches of the British loan will be drawn down in September. Under the original offer, this money would have cost Ireland 5.9 per cent, which includes a 2.29 percentage-point margin on the UK’s own loan to raise the money.
Initially, Mr Osborne told the Daily Telegraph that the UK would have made a £440 million profit on the loan, though the chancellor told Reuters last night that the UK would “still be more than covering the cost of our borrowing”.
Welcoming the chancellor’s decision, Minister for Finance, Michael Noonan said the loan would be charged at a rate “slightly below the new EFSF interest rate.
“At a personal level, I would also like to thank the chancellor for the significant support that he offered me on this topic during meetings in Brussels,” said Mr Noonan, adding that Mr Osborne’s calls for major action by euro zone members “was important” in reaching the final agreement.
Conservative MP, Douglas Carswell, said loans to Ireland should be set at the lowest-possible rate.